Big pay increases expected in South Africa

South Africans widely expect a rise in their income in the coming months, with many also getting on top of their debts.

This is according to TransUnion’s Consumer Pulse Study for Q4 2024, which explores consumer sentiment, behaviour, and emerging financial trends in South Africa.

“Our findings indicate that while financial stability and optimism are growing, there’s still concern around critical themes like inflation and credit access, where consumers continue to feel the economic pressure,” said Fatgie Adams, Head of Credit Risk Solutions at TransUnion Africa.

The report shows that consumer confidence in income growth is higher than in prior quarters.

79% of respondents expect their income to increase in the coming year, up from 74% in Q4 2023 and 76% in Q3 2024.

Moreover, only 20% of households reported a decrease in income in Q4, a small improvement from the prior quarter, while 42% said their income remained the same.

Optimism over increases is strong among younger generations, with 86% of Gen Z and 85% of Millennials expecting improved earnings.

South Africa’s easing inflation to 3.8% in September 2024 (the lowest since April 2021) and a 0.25% interest rate cut in the same month have contributed to this positive outlook.

These aspects have only improved, with inflation dropping to 2.8% in November and the Reserve Bank cutting rates by another 0.25% this month.

Moreover, 76% of respondents expressed optimism in their household finances, a five-percentage point increase from the previous year, showcasing an overall trend toward greater resilience.

Respondents are not wishful thinkers when it comes to their salary increases, with the South African Reward Association (SARA) expecting salary increases of 6% in 2024/25.

This will ensure that earnings beat inflation, meaning that South Africans should get richer.

In Q4, 65% of respondents reported being able to pay their bills in full, which is a six-percentage point YoY increase.

Gen Z and Millennials lead the trend at 68% and 66%, respectively.

52% of consumers have also cut back on discretionary spending, as Gen X (65%) and Baby Boomers (62%) are the most likely to make adjustments.

Reductions in digital services (26%) and cancelled memberships (30%) were some of the most common cost-cutting measures.

A growing number of consumers are also focusing on building emergency savings.

36% of Gen Z and 30% of Millennials increased their contributions to emergency funds or stokvels in Q4, with 28% of all consumers prioritising this goal.

Retirement savings saw a similar increase, with 24% contributing more than in prior quarters.

“The shift toward building financial resilience is significant, especially as younger generations balance immediate debt obligations with future savings,” said Adams.

Slight Decline in Credit Access

Credit access is a huge priority for South African consumers, with 93% stating that access to credit is crucial for achieving their financial goals.

That said, only 38% feel they have adequate access, a slight drop from Q3.

Demand for new credit has also increased, with 37% of consumers planning to apply for a new credit within the next year.

Interest is highest among Gen Z (41%) and Millennials (45%), with credit cards, personal loans, and ‘buy now, pay later’ services among the most sought-after options.

Despite this demand, 54% of respondents decided not to pursue credit applications.

31% said that the high cost of credit was a deterrent, even after the recent interest rate cuts.

Other factors such as finding alternative funding sources (30%) and concerns about income or employment stability (28%).

Looking Ahead

In response to the anticipated financial pressures, South African consumers also plan to make targeted adjustments in their budgets.

Top priorities include dropping discretionary spending (46%), boosting retirement savings (42%), and holding back on large purchases (41%) in the months ahead. The focus shows a continued trend toward cautious financial management and a growing emphasis on future financial security.

“The Q4 findings demonstrate that South Africans are becoming more financially resilient and proactive, but challenges remain, particularly in areas like credit access and digital security,” said Adams.

“As we move into 2025, empowering consumers through financial literacy, secure digital tools, and accessible credit will be essential in helping them achieve financial stability and growth.”

Read: Reserve Bank cuts interest rates by another 25 basis points